On the day after the leaders of the G20 nations left Toronto -- and left city workers to clean up after the weekend's mayhem -- John Ibbitson wrote that the summit was "a signal achievement for the Prime Minister, who set those targets and lobbied hard for other nations to embrace them."
On the same day, Paul Krugman looked at the targets and concluded: "We are now, I fear, in the early stages of a Third Depression.
And this third depression will be primarily a failure of policy. Around the world -- most recently at last weekend's deeply discouraging G20 meeting -- governments are obsessing about inflation when the real threat is deflation, preaching the need for belt tightening when the real problem is inadequate spending.
Mr. Ibbitson saw Canada leading the way, showing the rest of the world how to tighten its belt:
Now Mr. Harper has succeeded in convincing his peers that the time is right for other governments to follow Canada in shifting to deficit cutting. And once again he has an internationally certified mandate to chop government programs and search for additional revenue.
It bears repeating that Mr. Harper didn't see the Great Recession coming. He refused to read the signs. The problem now, wrote Krugman in Friday's New York Times, is that
This conventional wisdom isn't based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite's imagination -- specifically on what I've come to think of as the invisible bond vigilante and the confidence fairy.
Krugman then went on to define "bond vigilantes" as "investors who pull the plug on governments they perceive as unable or unwilling to pay their debts." These vultures believe that all countries -- particularly the United States -- are like Greece -- and that "(a) the bond vigilantes are about to attack America and (b) spending anything more on stimulus will set them off."
But, wrote Krugman, "what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long range problems." If inflation is indeed a tsunami which is about to sink the world's economies, there should be some upward movement in interest rates. But, after a slight uptick three months ago, interest rates have once again headed for the basement. The facts simply don't support the fears.
Mr. Harper is a very shrewd political animal. But, when it comes to factual analysis, he is not the sharpest tool in the shed. He is planning to build a series of new prisons in anticipation of a crime wave, even though crime (according to Statistics Canada) has declined year after year. The rate of violent crime has remained stable for ten years. His government offers unconditional support for Israel, ignoring the fact that the continued construction of settlements on occupied land and the blockade of Gaza contributes to the misery there.
The truth is that Mr. Harper's certitude is based on faith not fact. And he continues to believe that because he earned a Master's degree at the University of Calgary he is an economist. George Armstrong Custer graduated from West Point; but that did not make him a general. Mr. Ibbitson believes that the Prime Minister deserves kudos for leading the charge against world deficits. Historians may well look at the Toronto Summit and conclude that it was Mr. Harper's Little Big Horn.
This blog entry is cross posted at The Moderate Voice.